George Osborne returned from his summer holidays this week to find a cacophony of advice for him on how to boost the economy, as well as advice that his boss David Cameron should sack him as Chancellor in his planned reshuffle. He quickly torpedoed one piece of wisdom generously offered by Nick Clegg, saying the Lib Dem leader’s plans for a wealth tax could ‘drive away the wealth creators and the businesses that are going to lead our economic recovery’. Anyone eagerly expecting Osborne to lose his job in the next few weeks will be disappointed, but the Chancellor will continue to come under pressure, and not just from those riding the Ed Balls bandwagon.
One of Balls’ entourage, Chris Leslie, attempted his own demolition job on Clegg yesterday, adding that the Deputy Prime Minister had ‘supported a failing economic plan which has pushed Britain into a double-dip recession and is leading to borrowing going up by a quarter so far this year’. He’s only right in part, though. There is admirable consensus on cutting the deficit at the heart of the coalition, but the Liberal Democrats are actually sitting in the way of certain essential elements of this economic plan being implemented. As The Spectator’s leading article points out this week, Osborne still has many options available:
The problem facing the Conservatives is not one of personnel, but of ideas. Osborne is sitting in the Treasury surrounded by the baggage of the Gordon Brown years. Labour’s 2010 budget proposed a five-year plan cutting departmental spending by just over 2 per cent a year. Osborne hardened this only slightly, to just under 3 per cent. But the overall plan (slow-motion cuts, eased through by the world’s largest money-printing programme) was never going to revive the economy, because there was nothing to promote growth. Austerity is not enough: radical steps are needed to encourage people to hire, work, invest or start a company.
Osborne still has many levers left to pull. His most obvious option is to stimulate the economy by cutting tax for the low-paid. Under Osborne, the number of foreign-born workers has been rising at twice the rate as British-born workers, suggesting an urgent need to improve incentives to work. One example is to introduce German-style ‘mini jobs’ that would allow people to earn £400 tax-free, even from a second job, with minimal cost to the employer — a small but valuable example of supply-side thinking. That the Treasury is now considering this very proposal is a sign that Osborne is more adaptable than his enemies suggest. The past two years have shown that countries which try to borrow their way out of the debt crisis have failed, while those which have cut taxes to encourage growth have succeeded. Only the Conservatives realise this. The Labour party is captured by Ed Balls’s peculiar 1970s economics. The Liberal Democrats now want to tax the rich more, failing to understand that countries compete for people and Britain needs to lure job creators.
The Lib Dems are pretty gleeful that one of the main attempts so far to implement supply-side reform has been the Beecroft report. While Vince Cable has picked up many of Beecroft’s proposals, those that were an anathema to Lib Dem thinking were quite easy to kill off because the report provided precious little evidence to back up some of its more controversial recommendations. Those on the Lib Dem side saw it as a gift to their party that they were fighting something that they found so easy to knock down.
The leading article adds that Britain ‘just needs a more focused George Osborne’. One symptom of that focus will be a renewed push – and one involving more muscle than the Chancellor has shown so far – for schemes that will encourage the recovery by letting businesses breathe, and against any more helpful suggestions from his Lib Dem colleagues.Tags: Conservatives, Economy, George Osborne, Liberal Democrats, UK politics